A week after the upper house of the Swiss parliament voted to allow disclosure of UBS clients to the US government, the lower house of Switzerland’s parliament voted to prevent the disclosure of the names and financial secrets of as many as 4,450 Americans who held undeclared accounts at UBS.

A Swiss court had already ruled that commitment illegal, and the Swiss Federal Council had sought the parliament’s retroactive endorsement in a creative effort to salvage the deal.

"We expect that the Swiss government will continue to honor the terms of the agreement," IRS spokesman Frank Keith said in a written statement. "We continue to monitor the events in Switzerland, and we stand ready to pursue all legal options available to us should the Swiss fail to provide the required information."

If the Swiss fail to comply with the deal by the deadline in August, the U.S. government will face difficult choices. It can proceed with the indictment of UBS, which could, in theory, shut down UBS operations in the US, or impose multi-million dollar fines. They can also reach some other compromise with the Swiss.

The CFO for UBS AG told analysts, earlier today, that he expects that ultimately the names will be handed over.

Because the two houses of parliament voted differently, they would need to try and work out a compromise. If they cannot, it will set up a national referendum in Switzerland. While the Swiss banking sector is an extremely important part of the Swiss economy, many Swiss view their banks as a cause of current financial woes.